CDPs: The Cure-All To Customers’ Data Woes?

CDPs: The Cure-All To Customers’ Data Woes?

As brands seek to improve the customer experience and embrace digital transformation, they need to evolve how they recognize and engage with today’s demanding consumers.

In the past few years, customer data platforms (CDPs) have emerged as a proposed solution to a long-existing challenge: how to wrangle customer data into a persistent, universal profile and make the data available for analysis and action.

Unfortunately, early interest in the CDP market has led to confusion as vendors from different backgrounds and with different capabilities wrap themselves in the moniker, while simultaneously defining it on their terms. Today, more than 100 companies describe themselves, or are described by others, as a CDP, according to our recent research. However, we would classify less than 20 as true CDPs.

Setting The Record Straight

We define a CDP as a platform that is able to ingest and integrate customer data from multiple sources, offer customer profile management, support real-time customer segmentation, and make customer data accessible to other systems.

More specifically, at a minimum CDPs must be able to work with event-level behavioral data, customer demographic and contact data, transactional data, campaign data, customer service data, and any/all second- and third-party data. They also should be able to leverage an identity scheme that normalizes these data sources into consistent profiles and recognize both “known” and “unknown” individuals. Finally, CDPs must have an accessible (likely visual) way for nontechnical marketers to build channel-agnostic customer segments and seamlessly push that data out for use via a wide range of third-party engagement/activation solutions.

To be sure, that’s one powerful platform. While marketers are starting to catch on, our research details four primary reasons for what’s giving them pause:

  1. A large number of vendors that brand themselves as CDPs competed previously in other categories, such as tag management and analytics, or as data management platforms (DMPs). This has created a spectrum of competitors that have as many differences as similarities, as well as extremely divergent strengths and weaknesses that are lost on websites and in pitch decks.
  2. Many CDPs offer ancillary capabilities, which they position as core to a CDP offering. But in our interviews with more than 40 CDP and martech leaders, and an online survey with the Association of National Advertisers, there was little consensus on what a CDP must offer and what is ancillary.
  3. Some vendors in these adjacent categories (e.g., analytics platforms, orchestration engines, and engagement systems) feel compelled to label themselves as a CDP in order to be included in RFPs. Although these firms’ primary offerings are centered on the application layer–analytics and engagement–and although many admitted they don’t consider themselves to be a CDP, they say they need to label themselves as such for fear of exclusion from opportunities for which they are relevant.
  4. Other vendors in these adjacent categories attempt to negate the need for a CDP by claiming to offer CDP functionality. Often, though, these capabilities are a data management layer that underpin the vendor’s own ecosystem but don’t always make the data available to third-party solutions.

In broad terms, we see three major categories of martech provider: those that help manage customer data, generate intelligence, or enable customer engagement. Marketers that seek to successfully implement omnichannel communication with their customers need all three capabilities–and a CDP can power them all.

Why CDPs?

In our survey with the ANA, we asked marketers and advertisers about what drove them to select a CDP. The most common answers were to “modernize our marketing technology tools,” “improve our data-driven insight capabilities,” and “increase the accuracy of our audience profiles.”

The best way to select a vendor that is right for you is to start with what you need to solve. This will help clarify which vendors are the best fit for your needs as you research and interview them. We recommend assessing needs across three iterative steps:

Step 1: Begin with assessment of your end-to-end customer data and marketing stack:

If the answer is no to any of these, a CDP should be considered.

Step 2: Consider your current and desired use cases. Are you able to:

If the answer is no to any of these, a CDP should be considered.

Step 3: Looking beyond marketing, buyers should consider:

If the answer is yes to any of these, a CDP should be considered.

Long-Term Outlook

Customers expect their experiences to keep getting better. And they have shown that they will punish companies that fail to deliver personalized, relevant messages wherever and whenever they want to interact with a brand.

A CDP can significantly improve all three broad components of the omnichannel marketer stack, including managing customer data, generating intelligence, and enabling customer engagement. However, it’s time for vendors to be honest about their actual capabilities—and for marketers to be clear on their needs—to help stamp out confusion.

In the long term, we expect CDPs to expand their offerings and/or to be absorbed into larger platforms. But in the immediate term, they fulfill a need that most marketers identify with, understanding and recognizing customers and activating the insight to inform communications.